Subsequent Event - Legal Settlement with Investor

9 Months Ended

Feb. 29, 2020

Subsequent Event - Legal Settlement With Investor

Subsequent Event - Legal Settlement with Investor

13. Subsequent Event - Legal Settlement with Investor

On April 1, 2020, the Company entered into a binding term sheet ("Term Sheet") with Zeff Capital, L.P. ("Zeff") pursuant to which they agreed to pay Zeff an amount of $900,000 over a period of three years in cash or cash and stock in settlement of expenses incurred by Zeff during its solicitations in 2018 and 2019 in connection with the annual meetings of the Company, the costs incurred in connection with the litigation initiated by and against the Company as well as negotiation, execution and enforcement of the Settlement and Release Agreement, dated as of August 30, 2019, by and between the Company, Zeff and certain other parties. The Term Sheet calls for a cash payment of $300,000 on June 30, 2021, a second cash payment of $300,000 on June 30, 2022 and a third payment of $300,00 also on June 30, 2022, which can be paid in cash or common stock at the Company's option. There is no interest due on these payments. The agreement also has protections to limit the payments so that the debt covenants with the Company's Lender are not breached. The parties intend to enter into definitive documents for the settlement. However, the binding Term Sheet shall remain in full force and effect until such time as the definitive documents are executed by the parties or until the Term Sheet is terminated by mutual consent of the parties. The Company has accrued $818,000, the estimated present value of these payments using an effective interest rate of 5%, in the quarter ended February 29, 2020.